Will the new proposed economic measures work

[trustt]

The new president has said some very frightening words that "the nations economy will get worse". Will the proposed tax cuts work? if yes, in what way? are we suffering economically because we are a free market nation.

[Yggdrasil]

We can only hope they will, although from the news I read, Obama is pandering to the conservative right, and is going to go through with the tax cuts he promised, if only to save face.

Fuck

Although I have read in places that lowering taxes during economic decline stimulates economies, I still go with how I feel in my gut: Cutting taxes now is wrong. It's a political gimmick.

[Dichromate]

Haha no they won't work and you're all fucked.

As to tax cuts stimulating the economy - it really depends.
Tax cuts to lower income earners would probably help more than those to higher income earners, but the whole situation, not matter what's done, is simply going to be a case of 'too little, too late'.

[Parallax]

Originally Posted by trustt

are we suffering economically because we are a free market nation.

No, because we don't have a free market. That's exactly why we're suffering economically in the first place.

[Yggdrasil]

Parallax, I know you're an ardent proponent of pure free-market activities, but do Keynesian Economics not offer a more stable and responsible growth than that offered by unhinged economic freedom?

[Dichromate]

Originally Posted by Yggdrasil

Parallax, I know you're an ardent proponent of pure free-market activities, but do Keynesian Economics not offer a more stable and responsible growth than that offered by unhinged economic freedom?

Well lets see how it goes, because the US government ran to Keynesianism at the first sign that things were messed up.

Lol @ 'stimulus packages'.

[Yggdrasil]

Don't quote Bush's stimulus package as an example of failed Keynesian policies. Those packages were too little, too late. Obama's plan is much larger than Bush's, and incorporates almost every aspect of Keynesian theory, so in effect, it's a showdown.

Originally Posted by Dichromate

As to tax cuts stimulating the economy - it really depends.
Tax cuts to lower income earners would probably help more than those to higher income earners

How do you figure? I'm not a staunch believer in Trickle-down economics (or Reagonomics), but I don't see how tax cuts for the poor will help the US economy. Higher income brackets and big business are, in general, more savvy with their money than those of lower income. You cannot argue this without begging the question, with few exceptions. Furthermore if all income brackets were taxed 10% less annually, than the person making $1,000,000/1yr would have a larger sum of money saved then the person making $35,000/1yr. The money saved by big business is, ideally, reinvested back into the company thus creating more jobs / output. Money saved by rich individuals is likely to be invested back into the housing market / stock market. Both the formers are great ways to stimulate the economy. What about the $500's saved by Joe Schmo? Nothing productive can be done with $500. He'll buy a 40oz, some marijuana, and lower the debt he's already in. And now he's in the same position as before and has not helped the US economy at all.

This isn't to say I support tax cuts for the rich. The way to get out of debt is to decrease federal/state/local spending, decrease unemployment, slight regulations on free market (such as floors and ceilings), and time.

Decreasing revenue to get out of debt is something like fucking for virginity

[Yggdrasil]

I know that naturally, it would seem reducing state revenue during a recession would be akin to fucking for virginity, but it's a bit hazier than that. Placing greater tax burdens on the people during an economic decline would only provide short term gains, in the long run that dries up real bad. Kind of like building on an unowned sinkhole plot instead of paying for decent land. Alternatively, Obama is giving the people reduced taxes, coupled with reduced business taxes and interest rates, in hopes that that the measures spur investment and spending.

Welcome to the School of Keynesian Thought. Care for a biscuit?

Originally Posted by Dichromate

Haha no they won't work and you're all fucked.

As to tax cuts stimulating the economy - it really depends.
Tax cuts to lower income earners would probably help more than those to higher income earners, but the whole situation, not matter what's done, is simply going to be a case of 'too little, too late'.

We're all fucked? Not you? If so, I would like to subscribe to your newsletter.

[Dichromate]

Originally Posted by SurahAhriman

We're all fucked? Not you? If so, I would like to subscribe to your newsletter.

About Dichromate

Location
Australia

Oh don't get me wrong, quality of life here is going to go down the toilet, but it's actually possible for our consumers to de-leverage themselves because almost everyone here is on variable rate loans, and those loans are strongly linked to the cash-rate. It's entirely possible for the RBA to lower interest rates to 0%, with that flowing on to home loan interest rates.
The current RBA rate is 4.25%, with standard variable rates being around 6.75%-ish.

If shit gets really bad and our rates get lowered that far down, home loan rates are going to be as little as 2.5%.
Inflation will eat away real wages and reduces the real value of debt, it's rough but we'll cope.

Unless of course our government goes and does something really fucking stupid in the mean time.
Edit:
oh also, Our federal government had been running surpluses for more or less the past decade. Hell, they even started trying to lock away funds to cover future public service pension obligations. *slightly* better fiscal position than the good old US of A.

[Dichromate]

Originally Posted by TCStyle

Higher income brackets and big business are, in general, more savvy with their money than those of lower income.

If you're rich and you believe that, I have some mortgage backed securities for you to buy.

Originally Posted by TCStyle

Furthermore if all income brackets were taxed 10% less annually, than the person making $1,000,000/1yr would have a larger sum of money saved then the person making $35,000/1yr.

Yes, they would. Thank you for stating the obvious.
I'm not entirely sure what it had to do with anything, but you're correct.

Originally Posted by TCStyle

The money saved by big business is, ideally, reinvested back into the company thus creating more jobs / output. Money saved by rich individuals is likely to be invested back into the housing market / stock market.

Putting money into the stock market is not going to help shit.
There's bugger all demand, without intervention to stimulate demand the only way the only way supply and demand are going to be reconciled is a fall in the price level.
Oops, except with all that consumer debt falls in the price level increase the real value of debt.
(Note the falls in CPI in the past couple of months. This is fucking bad news.)

The problem isn't on the supply side, it's on the demand side.
You can't create jobs just by throwing money at business, business only exists because there's a demand for goods and services.

Originally Posted by TCStyle

Both the formers are great ways to stimulate the economy.

Assertion.
If the problem isn't a shortfall in investment, why would they do anything?
What areas of the economy are they going to invest in anyway? there aren't exactly great prospects anywhere much are there?
Not much point cutting taxes on the rich if they just buy treasury bonds is there?

Originally Posted by TCStyle

What about the $500's saved by Joe Schmo? Nothing productive can be done with $500. He'll buy a 40oz, some marijuana, and lower the debt he's already in. And now he's in the same position as before and has not helped the US economy at all.

He lowers the debt he's in, which reduces the repayment burden, which allows him to further lower the debt, or spend more on goods and services.

Originally Posted by TCStyle

The way to get out of debt is to decrease federal/state/local spending, decrease unemployment...

An assertion and nothing more.
The economic crisis and US government debt are, while related, not the same thing. It's definitely the case that to get a budget out of deficit either spending has to decrease or revenues increase, however your goals are a tad contradictory.
Decreasing government spending will increase unemployment, at the very least in the short term. Not a good idea with the whole economic crisis - it's too late anyway, but in the case of a country that isn't quite over the edge of the cliff it's still a bad idea.

Originally Posted by TCStyle

slight regulations on free market (such as floors and ceilings), and time.

You're seriously advocating price floors and ceilings? oh god, you're giving me a headache.

Originally Posted by TCStyle

Decreasing revenue to get out of debt is something like fucking for virginity

You're assuming the immediate goal of tax cuts is to get out of debt, which it isn't.

Originally Posted by Dichromate

Oh don't get me wrong, quality of life here is going to go down the toilet, but it's actually possible for our consumers to de-leverage themselves because almost everyone here is on variable rate loans, and those loans are strongly linked to the cash-rate. It's entirely possible for the RBA to lower interest rates to 0%, with that flowing on to home loan interest rates.
The current RBA rate is 4.25%, with standard variable rates being around 6.75%-ish.

If shit gets really bad and our rates get lowered that far down, home loan rates are going to be as little as 2.5%.
Inflation will eat away real wages and reduces the real value of debt, it's rough but we'll cope.

Unless of course our government goes and does something really fucking stupid in the mean time.
Edit:
oh also, Our federal government had been running surpluses for more or less the past decade. Hell, they even started trying to lock away funds to cover future public service pension obligations. *slightly* better fiscal position than the good old US of A.

Sounds worlds better. Maybe I'll give that application to blog about living in an Australian beach front paradise for 6 months another look.